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watsonwyatt.com
Leveraging Workforce Effectiveness and Workforce Health for Competitive Advantage
Joseph RicciutiWatson Wyatt Worldwide
May 7th, 2009
Copyright © Watson Wyatt Worldwide. All rights reserved
2
Agenda
Why are you here?– Connecting the dots around Health and Productivity
Management (HPM) and EAP What is the research saying?
– Linkages between stress, health, work and corporate performance
Extending EAP’s reach
Copyright © Watson Wyatt Worldwide. All rights reserved
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Controllable Risks That Are Impacting Business Performance
24/7
Agingparents
health
technology
internet
co-workers
continuous
learning
family/friends
financesworkload
security
world events
Significant work stress #1 reason for employee turnover1
Up to 80% of workplace injuries due to stress2
Mental health issues (stress, anxiety and depression) most common condition for STD and LTD claims3
Employees who feel efforts are not effectively rewarded experience higher stress, injury and illness rates4
Employees who have high demands placed on them and no decision latitude have higher adverse health outcomes5
1 “The Power of Integrated Reward And Talent Management” 2008/2009 Global Strategic Rewards Report And Canadian Findings, Watson Wyatt2 American Institute for Stress, Atkinson, 20043 “Staying@Work: Effective Presence at Work” Watson Wyatt Worldwide, 2007 Survey Report, Canada4 Dr. Tores Theorell, Karolinska Institute5 Dr Roberrt Karasek and Dr. Tores Theorell
Copyright © Watson Wyatt Worldwide. All rights reserved
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Stress is a contributing risk factor to business performance…
Employee lost time “away” from work and employee medical costs.
Employee lost productivity while “at work”.
Employee turnover.
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Stress: The Root of All Evil?
Work-related stress: harmful physical/emotional responses that occur when job requirements do not match an employee’s capabilities/resources/needs
Top 3 causes:1. How the job is defined2. Work group environment3. Relationship with supervisor
Changes in employee health relate directly to positive/negative changes in leadership, organizational commitment and reporting job strain
Copyright © Watson Wyatt Worldwide. All rights reserved
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Top 15 Drivers of Lost Work Time
0
50
100
150
200
250
300
350
400
450
500
Sleep disorders
Depression
FatigueBack/neck
AnxietyHypertension
Other emotional
ArthritisObesity
Chronic pain
Headache
Irritable bowel
High cholesterol
Heart disease
Allergy
Los
t wor
kday
s/100
FT
Es Absence Presenteeism
Source: Kessler’s HPQ – Adjusted to Workforce
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The Stress Disconnect
Despite the impact that stress has on employees (and organizational) organizations are unaware of the impact of stress on the workforce– Organizations fail to list stress among top 5 reasons
employees leave, while employees rank stress #1
Trust/confidence in managementWork/Life balancePromotion opportunitiesRelationship with supervisor
Work/Life balancePromotion opportunitiesBase payCareer development
Stress levelsBase payEmployee ViewOrganization View
2008/2009 Global Strategic Rewards® Study – Canadian Findings
Copyright © Watson Wyatt Worldwide. All rights reserved
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The Business Case for HPM
Many of “top 10” health conditions in terms of total workplace costs tied to/affected by stress
Research supports the impact of wellness programs on employee health
As health is a performance driver, “healthy”organizations should experience superior performance while reducing health-related costs
Copyright © Watson Wyatt Worldwide. All rights reserved
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Linking Research to Organizations: Staying@Work Survey Results
Workplace stress leads to increased health care costs due to workplace injuries, presenteeism, absenteeism, and higher healthcare costs.
Effective H&P programs can help reduce workplace stress and associated costs
Canadian and U.S. versions of Watson Wyatt’s Staying@Work (S@W) surveys show many organizations lack tools and knowledge to measure program effectiveness – Those that do see a positive impact on their
employees and their bottom lines
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S@W Highlights - Canada
Average Canadian participating organization spending over $10.5 million annually on total absence claims
Mental health claims the most frequent disabling condition for both STD (82%) and LTD (72%)
Respondents willing to commit resources to H&P programs, but are unclear whether they actually improve employee H&P
Organization measured against the H&P Scorecard can considerably improve overall health
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S@W Highlights – United States
Depression and stress have greatest correlation with higher health care costs, lost time and work impairment
Productivity losses related to personal and family health problems cost U.S. employers $1,685 PEPY or $225.8 billion annually
H&P cost trends outpace inflation and account for more than 20% of company payrolls
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TRS: Total returns to shareholders - change in stock price plus dividends (2004-2006 ÷ 2004)Market premium (or Tobin’s Q): Ratio of the market value of equity plus book value of debt divided by the book
value of assetsProductivity proxy: Revenue per employee with adjustmentsSource: 2007/2008 Staying@Work (US)
Impact of H&P Programs on Business Performance
Companies with the most effective H&P programs had a 75% TRS from 2004 through 2006– Also had 16% higher market value and 20% more
revenue per employee
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The Link Between Health and Productivity
Profitable employers:– View human capital as a top priority– Believe there is a need to differentiate, attract and
retain high value employees– Have adopted total rewards as an employer of choice
feature– Acknowledge that significant stress is felt in the
workplace– Recognize the performance return in “connecting the
dots” of HR policies and health programs to business outcomes
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Effective Employees
Motivated to help the
organization succeed
Have the training, resources, tools,
and equipment they need to do
their jobs
Know what to do to make the organization successful
Understand and live up to their organization’s values and expect the same from others
Watson Wyatt’s Four-Factor Model
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Employee Effectiveness and Business Performance
26%
18%
12%
33%
0% 5% 10% 15% 20% 25% 30% 35%
Typical firm
Firms with high commitment only
Firms with high commitment and high line of sight
Total Return to Shareholders (TRS)
Firms with high employee effectiveness
*Typical firm is based on the average of all companies represented in WorkUSA 2006/2007
Companies with employees that are high on all four factors have TRS that are almost 3x the typical* firm
Copyright © Watson Wyatt Worldwide. All rights reserved
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What Companies are starting to do differently and better….
Targeting and measuring health and productivity business metrics
Deeper dive diagnosis of their HR and Health programs
Calculating the cost of “doing nothing”
Prioritizing cost of interventions to best bets for successful business outcomes (efficient frontier).
Scorecard results to plan and measure future improvements.
Copyright © Watson Wyatt Worldwide. All rights reserved
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Organizational Strategies
People
Work Culture/Environment
EmployeeHealth
WorkplacePolicies/ Practices
Linking organizational health with workforce health
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Workforce Health & Effectiveness Pathway
Higher TRS
Human Capital and Financial Outcomes
Improved Worker
Productivity
Increased Turnover Savings
Improved Benefit Cost Management
Healthy and Effective Workforce
Improved Workforce
Effectiveness
Improved Workforce Health
high yield human capital
HealthPrograms
Workforce Effectiveness
Prevent
Support
Return
Communicate
Lead
Reward
Practices and Programs
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1919
Human Capital Strategies work much like a traditional investment portfolio strategy:
•Where are you relative to high performers?
•What are your best business opportunities?
•What is an acceptable ROI or EBITDA?
Health Programs
Wor
kfor
ce E
ffect
iven
ess
Efficient Frontier
Human Capital Portfolio
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Opportunity Cost Modeling
To successfully impact the areas of concern and achieve short-term productivity objectives, organizations must first:
Determine the “cost of doing nothing” Determine cost impact of achieving a desired state. Opportunity Cost determined by closing the gap in
the drivers of: workforce effectiveness Health programs effectiveness
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Pathfinder: identifying the right opportunities to improve workforce performance
HEALTH Programs
Employee EFFECTIVENESS
The “factors” of the 6 Pillars are measured and weighted before a final assessment is scored.(bold are high return potential for this example)
We score the 6 Pillars of Health Programs and Employee Effectiveness
Prevent• Health & Safety• Social/Psychological• Health Promotion/Wellness• Presenteeism Management
Return• Absence Management• Disability Management• Disease Management
Support• Benefit Program Management• Communication• Financial Management• Vendor Management
Reward• Performance Management• Hiring & Advancement
Lead• Customer Focus• Innovation• Respectful Treatment
Communicate • Communication• Supervision
Return
SupportPrevent
Communicate Reward
Lead
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2222
IMPACT PRIORITY
Category YourScore
Impact on Turnover
Impact on Program Cost
Impact on Productivity Timing Cost Return
Prevent Long term $150 000
Support Mid term $250 000
Return Short term $60 000
Communicate Short term $150 000
Reward Long term $250 000
Lead Mid term $60 000
Your Investment Guide
LOW MID-RANGE HIGH
Pathway to success… links weighted scores to best opportunities
Wor
kfor
ceEf
fect
iven
ess
HEA
LTH
Pr
ogra
ms
$2.5M 5:1 ROI
Sample
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Moving Forward: Addressing and Improving H&P
To successfully address areas of concern and achieve business and H&P outcomes, companies must first:– Evaluate the current state of drivers of organizational
health practices and workforce health practices– Determine the cost of doing nothing– Determine the cost impact of achieving a desired state– Evaluate the opportunity cost determined by closing
the gap between the present and desired state
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Targeted H&P Investments Will…
Reduce stress
Reduce turnover andreplacement costs
Improve business outcomes
Improve employee effectiveness
Improve attraction and retention
Reduce absence and disability costs
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Extending EAP’s reach
Become an EEAP services provider( Employer and Employee Assistance Program).
Think outside your comfort space and into new market space
Make Resilience Training part of your services portfolio
Understand that the employment deal will look much different after the recession and EAP firms may have to recalibrate their services to compete
Establish alliances or partnerships to grow market share….ie: Insurance industry; specialty firms like Compsych, and Elibay; etc.
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Questions and Contact Information
Joseph RicciutiClient Solutions Leader - Group & Health CarePhone: [email protected]